What is a Term Sheet? (2024 Update)

Seeking investment in your new business is a thrilling but stressful time. It’s even more exciting when the other party agrees to your proposed terms, whether formally or just on a simple handshake. To ensure that the promise is honoured, it’s best to get it in writing. Taking another party at their word before an Agreement has been signed is risky, but a Term Sheet can be a good way to minimise this.

A term sheet is a precursor document which you can use during the negotiation stages. While not a legally binding document, except for clauses like confidentiality and exclusivity, it’s a good way to document your terms. Further, a term sheet is usually the step before the execution of a legally binding contract.

Key points

  • A Term Sheet is a document you can use before you sign a legally binding contract
  • This document gives you a good idea of the essence of a deal
  • It can also help you in negotiating the final terms of the Agreement


Having a term sheet increases the transparency of the terms in agreements. This is especially if you are an early-stage startup. This is because the terms in the final agreement may be unfavourable towards you, and hidden away in convoluted language. A simplified term sheet sets out the deal generally. It also allows you to discern what the essence of the agreement will be.

It is optimal for you, as a startup seeking investment or a party seeking to sell your business, to require a term sheet from the other party or provide one to a prospective investor or buyer before you start your due diligence process. This ensures you don’t invest time and money without a good idea of the shape the final agreement would take. It also helps you ascertain if the other party’s plans and values align with yours.

What can I include in a term sheet?

You can include just about anything relating to the agreement in a term sheet. This usually includes any vital proposal points. While term sheets are usually not as detailed or complex, any proposed terms that you want to be in the final agreement should be included with enough certainty that both parties understand exactly how the final contract will be read. This essentially acts as your proposal, paving the way for further negotiations, or if the other party finds your terms reasonable, a signed promise that it will be reflected in the final agreement.

Is it worthwhile?

Certainly. Apart from the benefits discussed above, term sheets are widely used in the commercial landscape due to their flexibility and conceptual nature, allowing the parties to reflect project-specific considerations. From Uber Technologies Inc. (yes, that Uber) offering term sheets to investors in 2015 to sell $1 billion to $1.2 billion in convertible bonds, to IndiGo signing a term sheet for the purchase of 250 Airbus airplanes, term sheets are a prominent commercial fixture. If it is good enough for them, it is for you!

Ready to seek investment? On our platform you can customise your Term Sheet – Seed Investment in under 10 minutes.

Most Popular Articles
You may also like
Recent Articles

Get the latest news

By clicking on 'Sign up to our newsletter' you are agreeing to the Lawpath Terms & Conditions


Register for our free live webinar today!

Understanding ASIC Compliance: Essential Knowledge for Australian Startups

12:00pm AEDT
Wednesday 28th February 2024

By clicking on 'Register for webinar' you are agreeing to the Lawpath Terms & Conditions

You may also like

An ombudsman can help you if you have a complaint about a business or government agency. Read on to learn about the processes involved in having your issue heard.
A summary judgment is a judgment issued against one party without a trial taking place. Find out here when a summary judgment may be issued.
Are you approaching retirement and thinking about how you will manage your money? A superannuation income stream is a popular option. Read on to find out more.

Thank you!

Your registration is confirmed. Keep an eye on your inbox for an email with details on how to watch the webinar.